Time to buckle up, as this week is poised to be a big one for markets across the globe.
Investors are bracing for a two-day U.S. Federal Reserve meeting, and a crucial gathering among Bank of Japan (BOJ) officials that could send equal if not bigger shockwaves through the markets. Global stocks rose on Monday driven in part by expectations that the central-bank meetings will conclude on a dovish note.But the uptick in sentiment that’s followed a global sell-off last week could come to an abrupt end if policy makers’ pronouncements surprise the markets, analysts say.
“It is going to be a crucial week for global macro risk, as the BOJ and the Fed convene to decide on interest rates,” write analysts at Citigroup Inc., led by David Lubin on Monday. “We believe the post-BOJ/Fed price action may end up being more nervous than many investors originally thought … It could be a week of global repricing.”
Amid dovish speeches from a slew of Fed governors, a clutch of U.S. economic data that hasn’t come in strong enough to convince market participants, and a rise in market volatility, odds of a September Fed rate hike have fallen from 34 percent at the beginning of the month to 20 percent today.But hawkish statements from the Fed combined with market doubts about the BOJ’s strategy to reflate the Asian economy could make market volatility flare up again.